Summary: Sea-fronting Sihanoukville is emerging as a credible growth city of the future due to a confluence of structural factors such as owning the only deep water port in Cambodia, development of its Sihanoukville Special Economic Zone with China, possessing a premium beach-side tourist attraction, having its own international airport, and improved ground connectivity. However, as the city is still in the early stages of development, critical success factors for investing in its property would depend on the investor’s entry timing of entry (i.e. not too early nor too late), as well as the authorities’ commitment to transform the city and improve its infrastructure over time.

Still in early stages of development

Our second stop was Sihanoukville, a seaside city in Cambodia. Named after the former King Norodom Sihanouk, Sihanoukville is located in the southwest of Cambodia at the Gulf of Thailand, and 220km away from capital city of Phnom Penh.

Sihanoukville is a natural tourist attraction with its long stretch of white sand, rustic bamboo bars, and slew of casino facilities (currently 30+ casino licenses approved). The number of visitors is rising, especially from China.

While new industrial sectors such as textile and clothing, machinery and electronics are taking shape, our ground checks suggest that the city is still in the early stages of development. The infrastructure remains largely under-developed and disjointed, the population size is still small at approximately 300,000, and large tracts of land has yet to be utilized.

As reference, our checks suggest that new high-end condo units in Sihanoukville are launched at USD1600 – 2200psm, which is about 30% lower than USD2500-3000psm in Phnom Penh.

Does Sihanoukville have what it takes to be a growth city?

Many travel experts are tipping Sihanoukville as ASEAN’s next resort property investment centre, akin to Phuket and Koh Samui in the 1990s.

We identify five structural factors that could help transform the city of Sihanoukville over time.

Prominent deep water port. Sihanoukville controls Cambodia’s only deep water port. The 21st Century Maritime Belt, which is part of China’s One Belt One Road initiatives, has highlighted Sihanoukville port as an Ocean route within the Siam Bay Route (which includes Hai Phong Port and Bangkok Port). China’s Qingdao Port has also entered into a “sister relation” agreement with Sihanoukville port in June 2015, where both ports will expand co-operation, especially on port construction and management.

Sihanoukville Special Economic Zone (“SSEZ”). Sihanoukville is home to the SSEZ, an overseas economic and trade cooperation zone between China and Cambodia. This is one of the model showpiece of China’s One Belt One Road policies, and some has called SSEZ “Shenzhen in Cambodia”. The SSEZ has a total planned area of 11.13 sqkm, and its 100th factory opened for operation in June 2016. When fully completed, it is expected to house 300 factories and 80,000 to 100,000 industrial workers. As we drove around the SSEZ, we saw mostly factories from China, with industries ranging from textile and clothing, and machinery and electronics, to high tech products. With the SSEZ, Sihanoukville is able to create new industrial jobs and raise incomes for the locals. Chinese companies that set up operations could boost land take-up.

Premium tourist destination. Sihanoukville’s natural beauty and unspoilt beaches, such as Sokha Beach, Independence Beach and Sirendipity Beach, have enticed an increasing number of short-term tourists as well as seasonal and permanent foreign residents. The number of tourist visitors in the province reached 1.3m in the first 5 months of 2016, up 16% y-y. Rated as among the Most Beautiful Bays in the World Club, the seaside city has considerable recreational potential and the opportunity to be a world-class tourist spot. There are plans to expand its international cruise terminal, add more shopping amenities, and improve casino facilities.

Expanding international airport. Sihanoukville International Airport is Cambodia’s third international airport, after Phnom Penh (Capital city) and Siem Reap (Angkor Wat). An expansion of the airport is underway, and more direct flights from key cities in ASEAN and China could enhance the city’s status as a formidable contender in ASEAN’s resort property sector. For example, Xi’an and Shijiazhuang in China began their first direct flight to Sihanoukville in Sep 2016, according to Xinhua).

Improved ground connectivity. A new expressway is under construction between Phnom Penh and Sihanoukville. Once completed, it will replace National Highway 4, the two-lane road that is often congested. This is expected to cut down travelling time from 4 hours to 2 hours. As for railway, the Cambodian government has recently revived the train services between Phnom Penh and Sihanoukville, adding a new transport mode between the two major cities. Longer-term the Silk Road Economic Belt vision could include a high speed rail network from Thailand through Cambodia and Vietnam into China. If implemented, this could further enhance the connectivity of key Cambodian cities such as Sihanoukville.